چکیده انگلیسی

It is hypothesized in this study that the relationship between institutional ownership and inventory management is more likely to be moderated by other internal corporate governance mechanisms (i.e., managerial ownership, board leadership structure and board size). This is more likely to happen as one weak governance mechanism in one area will be offset by a strong one in another area. Furthermore, the effectiveness of one corporate governance mechanism (i.e., institutional ownership) is more likely to be contingent on some contextual variables. Econometric analysis, using a sample of Egyptian listed firms, provides strong evidence for the applicability of this theme and demonstrates that institutional ownership affects inventory management positively (negatively) when managerial ownership is high (low), CEO duality (non-duality) is in place, or board size is large (small). This conclusion is robust to the use of different control variables and econometric models.

مقدمه انگلیسی

Inventory represents one of the most important and difficult assets to be managed at firm level as well as at macro economy level. Conventionally, academics and practitioners argued that inventories have a triple role in modern organizations: as contributors to value creation, as means of flexibility and means of control (Chikan, 2009). The underlying interrelationship between corporate strategy and inventory (Hitt and Ireland, 1985, Li, 1992 and Tamas, 2000) has induced much of existing research to examine its main usual suspects. Examples of these usual suspects include volume and structure of inventories (Chikan, 1996), incentives for efficient inventory management (Baldenius and Reichelstein, 2005), parameters that impact on inventory policy (Borgonovo, 2008), efficacy of inventory (Barker and Santos, 2010), and determinants of inventory turnover (Gaur et al., 2005 and Kolias et al., 2011).
In this context, theoretical and empirical studies are conducted to investigate the relationship between inventory and different managerial and financial issues. Example of these issues include capital structure (Luciano and Peccati, 1999), demand uncertainty (Bo, 2001), risk measure selection (Borgonovo and Peccati, 2009), risk aversion (Chen et al., 2007), liquidity and financial constraints (Carpenter et al., 1998, Corbett et al., 1999 and Buzacott and Zhang, 2004), managerial perception (Chikan, 2009), financial performance (Cannon, 2008), transaction costs (Girlich, 2003), organizational design (Vries, 2005), stock market (Lai, 2006 and Tribo, 2009), ownership structure (Niehaus, 1989, Dimelis and Lyriotaki, 2007, Tribo, 2007 and Ameer, 2010), and corporate social responsibility (Barcos et al., 2012).
Previous studies that examined the relationship between institutional ownership and inventory management and policy, to the best of our knowledge, are limited to the studies of Tribo (2007) and Ameer (2010). Both of these studies have argued for a positive relationship between institutional ownership and inventory management. This positive correlation is justified through two different channels: liquidity channel and control channel. Existing of institutional ownership, according to liquidity channel, increases the ability of the firm to access more cash from creditors. This, in turn, should induce a lower inventory level as its need to accumulate cashable assets like inventories to hedge liquidity shocks is reduced (Tribo, 2007). On the other hand, according to control channel, strong voting power and superior knowledge of institutional shareholders enable them to manipulate decisions of management effectively. Hence, excess inventory as a sign of mismanagement is unlikely to be presented in this situation (Tribo, 2007 and Ameer, 2010).
In fact, this conclusion ignores that the effectiveness of one corporate governance mechanism (i.e., institutional ownership) is more likely to be contingent on some contextual variables and that the effect of one mechanism can depend upon others. Put simply, this conclusion disregarded not only the documented relationship between institutional ownership and managerial shareholding (Bathala et al., 1994, Chen and Steiner, 1999, Crutchley et al., 1999, Joher et al., 2006 and Khurshed et al., 2011), but also the interrelationship between institutional ownership and board characteristics (i.e., size and leadership structure) (Huse, 2005, Li et al., 2006, Elsayed, 2007, Elsayed, 2010 and Khurshed et al., 2011). Furthermore, this argument overlooks that the effectiveness of institutional investors is more likely to vary across-nations. This is because national institutions may allocate power within firms in a different way (Aguilera, 2005). For instance, although the USA and the UK have a common law system, each county has decided to address corporate governance initiatives differently (Aguilera, 2005 and Huse, 2005).
In fact, to hypothesize that institutional investors are always “active” or “passive” in their actions towards monitoring and controlling responsibility, and hence, inventory management and to model this case as a linear relationship are considered as idealistic themes. Rather, it is more reasonable to expect that the relationship between institutional investors and inventory management is a nonlinear one that might be moderated by various motivations. This is more likely to happen as institutional investors are generally profit maximizers who will not be engaged in an activity whose costs exceed its benefits ( Bainbridge, 2008), will not take their decisions far from considering expected financial returns ( Sparkes, 1998 and Matterson, 2000), and behave differently across-countries ( Seifert et al., 2005).
Moreover, because it is unfeasible to expect which firm will face which problem, institutional investors will be required, as a result of asymmetric information, to monitor all of their portfolio firms. However, increasing cost of monitoring, intervening and reforming do not provoke institutional investors “to be involved in day-to-day corporate matters. Instead, they are likely to step in only where there are serious long-term problems…[and] is likely to focus on crisis management” (Bainbridge, 2008: 13–14). This possibility is more likely to be high with relatively small size investment of long-term institutional investors, information asymmetry, and non-existence of collation among shareholders. The implication of this assertion is that institutional investors are more likely to play an active (passive) role in monitoring management behavior and decisions in contexts that facilitate (hinder) managerial entrenchment. “Managerial entrenchment occurs when managers gain so much power that they are able to use the firm to further their own interests rather than the interests of shareholders” (Weisbach, 1988: 435). Managerial entrenchment varies not only with national cultural and governance systems (Short and Keasey, 1999), but also with managerial ownership, board leadership structure, and board size (Finkelstein and D'Aveni, 1994, Zhou, 2001 and Elsayed, 2011).
Thus, this study is designed to add to existing literature by exploring the moderating effect of managerial ownership, board leadership structure, and board size through testing the relationship between institutional ownership and inventory management using a sample of Egyptian listed firms. Doing so not only helps to better understand the comparative corporate governance and inventory debate, but it also can enhance corporate governance and inventory management practices in Egypt as an emerging market. Presenting data from other less developed contexts is more likely to develop the existing theory of corporate governance, as countries' cultural differences will cause directors to have different ethical perceptions and orientations (Aguilera, 2005).
The remainder of this paper is structured as follows. The second section is devoted to discuss different arguments regarding the role of institutional ownership as a corporate governance mechanism. The third section presents some evidence regarding corporate governance and ownership structure in the Egyptian context. The fourth section is designated to develop some testable hypotheses in this study. Sample and variable measurements are found in the fifth section. Empirical findings are presented in the sixth section. The final section is dedicated to portray conclusions, discussion of the main findings, and some directions for futurework.

نتیجه گیری انگلیسی

Much of the existing research has been directed at examining the effects and consequences of inventory on various organizational issues, with little to say about the link between ownership structure and inventory management. The main conclusion in previous limited work is that institutional ownership and inventory management are positively correlated. The underlying premise of this conclusion is that one universal structure fitsall.
However, the main argument of this paper is that the relationship between institutional ownership and inventory management varies with other applied internal corporate governance mechanisms (i.e., managerial ownership, board leadership structure and board size). Empirical analysis of a sample of Egyptian listed firms presents strong evidence for the applicability of thistheme.
On the whole, the findings reveal that institutional ownership affects inventory management positively when managerial ownership is high, CEO duality is in place, or board size is large. Alternatively, institutional ownership exerts a negative and significant coefficient on inventory management when managerial ownership is low, CEO non-duality is adopted, or board size issmall.
The findings of this paper have some implications. First, although Egyptian government has changed legislations and introduced many new mechanisms that have improved the economic climate in Egypt, it seems that more effort is required to reveal the awareness among Egyptian firms regarding the best practices and codes in corporate governance. For instance, as an urgent must, more initiatives and programs must be developed in order to attract more foreign institutional investments as a way of improving the quality of corporate governance in Egypt. Having more foreign investment, especially for developing countries, means more advanced technology and a greater likelihood of more developed practices. This is an important issue as the findings of this paper showed that foreign ownership currently does not affect inventory efficiency significantly. Second, to find that the impact of institutional investors on inventory efficiency varies with corporate governance mechanism in the Egyptian context implies that before developing and launching new and additional corporate governance reforms, policy makers in Egypt should understand that “context” and “actors” will best explain differences in corporate governance systems.
The results of this study imply that institutional ownership and inventory management may correlate either positively or negatively under certain conditions. In other words, existing theories and evidence might need to be treated as complementary viewpoints, each of which comprises a part of the whole picture. To assume that a theoretical perspective is always valid is more likely to result in misleading conclusions about the whole structure. This is more likely to be a plausible argument as some authors concluded that inventory intensity (Chikan, 1996) as well as the effect of institutional shareholders (Aguilera, 2005 and Seifert et al., 2005) varies with country characteristics.
The negative impact of managerial ownership on inventory management that is reported in this study aligns with the results of Niehaus (1989). In addition, The negative coefficient that board leadership structure (CEO duality) has exerted on inventory management is consistent with the argument of some scholars (e.g. Levy, 1981 and Dayton, 1984) who suggest that CEO duality diminishes the monitoring role of the board of directors over the executive manager, and this in turn may have a negative effect on corporate performance. Moreover, the negative impact of board size on inventory management gives supportive evidence for the advocates of small board size (e.g., Lipton and Lorsch, 1992 and Jensen, 1993) who argued that when a board becomes large, the ability of the board of directors to satisfy its main functions will be limited.
In fact, documented negative correlation between firm leverage and institutional ownership (−0.12, p<0.05), in this study, provides supportive evidence for the conclusion of Graves and Waddock (1994) who argued that institutional investors are risk-averse and therefore, they often, in making their investment, prefer firms with low debt ratios. Thus, future research is invited to examine how the relationship between institutional ownership and inventory policy vary with firm leverage. Furthermore, future studies need to investigate the moderating effect of firm financial performance on the relationship between institutional ownership and inventory policy. This is expected to add to our knowledge as some previous studies found that strong financial performance leads to increase in institutional ownership (see, for example, Graves and Waddock, 1994 and Cox et al., 2004).
Besides, the significant effect of industry type that is documented in this study indicates that the moderating impact of industry type on investors' perception toward inventory management represents another promising area for future research. This is because some investors may not prefer to invest, for example, in tobacco industry as a result of their ethical orientation, while this industry for many other investors is an “uncontrolled financial risk” (Hummels and Timmer, 2004).
Scholars, in future studies, are also invited to investigate how the relationship between institutional ownership and inventory management is moderated not only by investment horizon and size, but also by institutional investors' activism and coordination. This is important as previous work (see, for example, Zahra et al., 2000 and Huse, 2004) argued that institutional investors are not often one consistentgroup.
Since this is the first study, to the best of our knowledge, that provides empirical findings regarding the link between inventory management and some internal corporate governance, namely, managerial ownership, board leadership structure and board size, future studies are invited to replicate and retest these findings in other contexts or countries. Moreover, another potential area that future research is encouraged to explore is the determinants of inventory management in developing countries and how they possibly differ from those variables that affect inventory efficiency in developed countries.